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2016 Annual Results
Leveraging Competitive Advantages · Growing For The Future
March 2017
Disclaimer
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2
Table of Contents
2016 Highlights
2016 Financial Summary
2016 Business Review
Strategies and Outlook
Appendix
1
2
3
4
5
3
1 2016 Highlights
Major Achievements
5
1
2
3
5
6
Debuted in the Fortune Global 500 List and
continued to solidify industry leading position
Achieved strong growth and record results in China
and the U.S.
Realized synergies on a global scale and expanded
export trades significantly
4Officially launched Smithfield packaged meat
products and adopted dual-brand strategy for China
business
Maximized efficiency, reduced costs and enhanced
profitability
Continued to reduce debts and optimize capital
structure; assigned investment grade ratings by
three international rating agencies
Financial Highlights
6
2
34
1
Revenue increased
by 1.5% Y-o-Y to
US$21.534Bn
Operating profit(1)
increased by 14.8%
Y-o-Y to
US$1.788Bn
Proposed final
dividend of
HK$0.21/share and
FY2016 total dividend
of HK$0.26
Profit attributable to
owners of the
Company(1) was
US$1.014Bn,
representing a Y-o-Y
growth of 17.1%
Note:1. Before biological asset fair value adjustments
2016 Financial Summary 2
Consolidated Financials Overview
2016 Full-Year (1) 2015 Full-Year (1) Y-o-Y Change
Hogs produced(’000 heads) 19,184 19,077 0.6%
Hogs processed(’000 heads) 49,286 48,335 2.0%
Packaged meats external sales volume(’000 metric tons) 3,219 3,183 1.1%
US$ million except as noted 2016 Full-Year (1) 2015 Full-Year (1) Y-o-Y Change
Revenue 21,534 21,209 1.5%
EBITDA (1) 2,238 2,044 9.5%
Operating profit (1) 1,788 1,557 14.8%
Profit attributable to owners of the Company (1) 1,014 866 17.1%
Basic earnings per share(US$ cents) (1) 7.42 6.34 17.0%
Interim dividend per share(HK$)(paid on Sep 20th ,2016) 0.05 - N/A
Proposed final dividend per share (HK$ ) 0.21 0.125 68.0%
Key Operating Metrics
Key Financial Indicators
Note:1. Before biological asset fair value adjustments 8
Packaged Meats is Our Core Business
2016 Revenue by Business Segments (1)
%
2016 Revenue by Region (1)
%
2016 Operating Profit by Region (2)
%
2016 Operating Profit by Business Segments(2)
%
Note:1. External sales2. Before biological asset fair value adjustments
PackagedMeats
Fresh Pork HogProduction
Others TotalOperating
Profit
(10.8%)100%
30.5% (2.2%)
Packaged Meats51.4%
Fresh Pork42.6%
Hog Production3.9%
Others and Corporate2.1%
China36.0%
U.S.57.4%
Europe6.6%
China46.0%U.S.
49.7%
Europe4.3%
9
82.5%
Total
1,788
Total
21,534
Total
21,534
0.00
5.00
10.00
15.00
20.00
25.00
0
1
2
3
4
United States China
Hog Prices in China and U.S. During 2015 and 2016
Source: Chicago Mercantile Exchange and Ministry of Agriculture of the People’s Republic of China
The pork prices in China are
reflections of the supply and
demand of hogs in the
market. In 2016, the average
hog price in China was
RMB18.6 (approximately
US$2.8) per kilogram (“kg”),
a surge of 22.1% over 2015
In the U.S., the average hog
price during the year of 2016
wasUS$1.1 per kg, a
decrease of 7.6% over 2015
Highest point :RMB20.45/kg, May, 2016 Average US$/kg RMB/kg
10
Lowest point:US$ 0.82/kg, Nov, 2016 Average
Financial Highlights - China
Profit Growth Continued
Note:1. Percentage marked in white on the bars represent Operating Profit Margin = operating profit / external sales2. Percentage marked in white on the bars represent Operating Profit Margin = operating profit / internal and
external sales
Operating profit margin
Operating Profit and
Margin (1)Packaged Meats(2) Fresh Pork (2) Hog Production (2)
US$ million US$ million US$ million US$ million
811 823
10.6%11.4%
FY2015 FY2016
1838
FY2015 FY2016
41.3%
11
8098
2.1% 2.1%
FY2015 FY2016
782
725
22.0%
21.7%
FY2015 FY2016
20.9%
Operating profit margin
696
5.5%
7.2%
FY2015 FY2016
888
668
714
9.4%10.0%
FY2015 FY2016
168
472
2.4%
6.7%
FY2015 FY2016
12
12
(144)
FY2015 FY2016
Financial Highlights - U.S.
Profit Achieved Strong Growth
Operating Profit and
Margin (1) Packaged Meats(2) Fresh Pork (2) Hog Production (2)
US$ million US$ million US$ million US$ million
Note:1. Percentage marked in white on the bars represent Operating Profit Margin = operating profit / external sales2. Percentage marked in white on the bars represent Operating Profit Margin = operating profit / internal and
external sales
0.4%
(5.3%)
Financial Highlights - Europe
Profit Achieved Strong Growth
Operating profit margin
50
77
3.6%
5.4%
FY2015 FY2016
49
367.7%
5.5%
FY2015 FY2016
(22) (25)
(2.6%) (2.8%)
FY2015 FY2016
24
66
5.4%
12.7%
FY2015 FY2016
13
Operating Profit and
Margin (1) Packaged Meats(2) Fresh Pork (2) Hog Production (2)
US$ million US$ million US$ million US$ million
Note:1. Percentage marked in white on the bars represent Operating Profit Margin = operating profit / external sales2. Percentage marked in white on the bars represent Operating Profit Margin = operating profit / internal and
external sales
224
80
335
306
70
65
FY2015 FY2016
China U.S. Europe
(28.3%)
77.2%
58.4%
40.9%
2014/12/31 2015/12/31 2016/12/31
Strong Cash Flow and Optimized Capital Structure
Operating Cash Flow
US$ million
Capital Structure
Interest-bearing Liabilities Interest-bearing Liabilities/Total EquityUS$ million %
Capital Expenditures
US$ million
1,613
1,850
FY2015 FY2016
Total: 629 Total:451
4,670
3,914
2,878
2014/12/31 2015/12/31 2016/12/31
14
14.7%
3 2016 Business Review
Major Achievements
Shuanghui seized developing opportunity under double pressures from economic
downturn in China and higher raw materials cost, and achieved stable business growth
Further enhanced market share through continuous optimization of network coverage and
supply chain
Product mix strategy is moving towards new milestones through reorganization of R&D
team
Efficiency improvement and cost reduction through “One Smithfield” initiative
Business growth through continuous innovation on packaged meat products
Achieved synergies with remarkable growth in trade between China and the U.S.
16
Effective hedging strategy to mitigate risk of industry volatility
Shuanghui seized developing opportunity under double pressures from economic
downturn in China and higher raw materials cost, and achieved stable
business growth
Note: (1) Data of Shuanghui is under China GAAP
Bn RMB
External Sales Volume Revenue(1) Shuanghui Operating Profit( 1)
2,755
2,967
2015 2016
44.7
51.9
2015 2016
5.25 5.44
2015 2016
3.6%16%7.7%
China’s GDP growth is slowing down…
2010-2016 GDP Y-o-Y Growth Rate, %
…And retail sales have witnessed declining growth
2010-2016 China Retail Sales of Consumer Goods Volume Y-o-Y
Growth, %
17
Source National Statistics Bureau Source National Statistics Bureau
10.6
9.5
7.9 7.87.3
6.9 6.7
2010 2012 2014 2016
Bn RMBThousands of Tons
16.2
17.1
14.3
13.1
12.0
10.7 10.4
2010 2011 2012 2013 2014 2015 2016
Further enhanced market share through continuous
optimization of network coverage and supply chain
%
18
37.4%37.7%
39.6%
2014 2015 2016
Packaged meat products of Shuanghui continue to improve
its market share in national supermarket channel (1)
Note: (1) National Supermarket Channel Share (CICC Data)
Further tapped into the market and expanded points of
sale to 970,000 at the end of the year under the
“Optimizing Product Mix, Expanding Network,
Accelerating Transformation and Growing through Scale”
strategy
Competitive advantages over nationwide supply
chain, distribution network, cold chain logistics and
sales network
Smithfield packaged meat products were launched
since early 2016. Its market share continues to
increase with great potential
Sales network and Logistics Centres
Slaughtering Facilities and Meat
Processing Facilities
Logistics Coverage
Product mix strategy is moving towards new
milestones through reorganization of R&D team
Western style Food Service American styleLeisure SnacksChinese feature
• Reorganized the R&D team to expand from 1 R&D
center to 8 R&D centers. Tailoring products to local
consumer preferences
• 150 products were developed under 6 categories
over a 6-month period and 80 products were
launched
• New product sales volume achieved 192,000
tonnes, representing 12% of the total sales volume
Mianyang
Guangzhou
Dezhou
Harbin
Shanghai
19
HongKong
Luohe
1. Vertically integrated value chain of offset against
industry volatility and increase competitivenessSet a record high for Smithfield
US$MM
20
• In 2016, the average hog price decreased 7.6%
over the last year, operating profit for the hog
production segment decreased by US$156MM Y-
o-Y, but the operating profit for the fresh pork
segment and packaged meats segment
increased by US$304MM and US$46MM Y-o-Y,
respectively. The impact of price volatility in the
upstream business was well mitigated through
remarkable performance in the downstream.168
472 12
(144)
668
714
2015 2016
Packaged Meats
Hog Production
Fresh Pork
Efficiency improvement and cost reduction through
“One Smithfield” initiative
2. Optimized capacity, reduced cost and improved efficiency
Allows for better
management of front-end
sales process
Unified management of
brand portfolio with
cohesive strategy
Optimizes manufacturing
platform
Removes costs from
logistics and distribution
systems
“One Smithfield”
CATALYST FOR
PROFIT
IMPROVEMENT
3. Seized opportunities to expand
production and hence sustainable growth
Organic Growth
Continuous Improvement
Strategy Pivots
New Plant Capacity
Mergers & Acquisitions
From “One Smithfield” Initiative to “Earnings Improvement & Growth Plan”
18%
Vendor A 17%
Vendor B 15%
Vendor C8%
Vendor D6%
Vendor E 6%
Vendor F 4%
Others 26%
41%
21% 20%18% 16% 14%
12% 10%
0%
10%
20%
30%
40%
50%
Ham Bacon HotDogs
CookedDinner
Sausage
BBQ DrySausage
PortableLunches
DeliMeats
#3
34%
29% 28%
25%
17%
0%
10%
20%
30%
40%
Bacon Ham BBQ BreakfastSausage
Hot Dogs
#1 #1 #1#1
#2
U.S packaged meats segment is #1 across
several Retail & Foodservice categories
Business growth through continuous innovation on
packaged meat products
U.S. Packaged Pork – Foodservice (1) %
1. Westport Consulting Group 2015.
2. . Information Resources, Inc. (IRI) 52 weeks ending 20161225 and Nielsen Perishables Group 52 weeks ending
20161031.
21
#1
#1#1
#2 #2#2#3 #2
U.S. Packaged Pork – Retail (2)
#1 U.S. PACKAGED
PORK COMPANY
• #1 Supplier to retail and foodservice
• Brands ranked #1 in numerous
product categories
Note: IRI 52 weeks ending 12/25/16, Nielsen
Perishables Group 52 weeks ending 12/31/16.
Business growth through continuous innovation on
packaged meat products
Owning the
Grill, Skillet, &
Breakfast
Market
Expanding
into the frozen
section
22
13.5
(1.0)
(1.3)
22.9
0.8
(9.2)
0.6
(9.1)
0.4
42.0
(12.2)
(11.3)
(20)
(10)
0
10
20
30
40
50
2011 2012 2013 2014 2015 2016
Smithfield hog production hedge adjusted EBIT (US$/head). 2011-2013 under USGAAP and 2014 onward under IFRS"Industry average"- ISU wean-to-finish model EBIT (US$/head)"
Effective hedging strategy to mitigate risk of industry
volatility
Hedging program effectively managed price volatility
USD/head
23
• The average hog price in
the U.S market was
US$1.1 /kg, decreased by
7.6%Y-o-Y .Smithfield’s
hog production segment
has outperformed its
peers, largely attributable
to proper hedging strategy
Achieved synergies with remarkable growth in trade
between China and the U.S.
24
Smithfield pork (3) export to China continues to grow (1),
(2) , taking a leading position in the U.S. market
Note :
1. China, not includes Hong Kong
2. Percentage marked in white on the bars represent market share
3. Pork : pork & pork products
Source: USDA
Thousands of Tons
179
280
25
83
2015 2016
Smithfield export to China Rest of industry export to China
88%
77%
204
639 715
1,498
1,596
2015 2016
Rest of industry export to all countries
Smithfield export to all countries
30%31%
The total volume of Smithfield pork (3) export to all
countries continues to grow (2) , ranks #1 among all
the industry in the U.S.
3632,137
2,311
Strategies and Outlook4
Major Changes Post Acquisition of Smithfield
26
Profit increased
737
866
1,014
2014 2015 2016
Net Profit Attributable toOwners of the Company
Net assets increased Capital structure improved
2,912 3,138
6,050
6,703 7,038
Acquisitioncompleted2013/9/26
2013/12/31 2014/12/31 2015/12/31 2016/12/31
Net Assets
7,988
7,432
4,670
3,914
2,878
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Acquisitioncompleted2013/9/26
2013/12/31 2014/12/31 2015/12/31 2016/12/31
0%
50%
100%
150%
200%
250%
300%
Interest-bearing Liability
Leverage ratio%
237%
77.2%58.4%
40.9%
USD Million USD Million USD Million
274%
Group Development Strategies
Adhere to Globalization Strategy - Develop trading platform and business network in a global
perspective to form the competitive advantage, to realize further development, and to create long-
term value for the company, employees, society, investors and other stakeholders.
Leverage complementary advantages and realize synergies by integrating global resources
Integrate global brands to enhance brand influence and product competitiveness
Bring together global talents to build an elite team
Expand business scope and diversify animal protein exposure as appropriate
Business Development Goals
Growth through realizing synergies, integrating global resources and accelerating the expansion
of international trade
U.S. business: Continue "One Smithfield" and "Operational Excellence" initiatives, and
progressing towards being a leading consumer goods company. Initiate the “Earnings
Improvement and Growth Plan” to lay the foundation for long-term growth.
China business: China Strategy continues – “Optimizing Product Mix, Expanding Network,
Accelerating Transformation and Growing through Scale”. Accelerating the expansion of
slaughtering business, optimizing product mix, expanding downstream business to realize
further development.
Strategies and Outlook
27
Appendix5
Results Overview – Shuanghui (China GAAP)
Note:
1. External sales
2. Segment operating margin = segment operating profit / internal and external sales
3. Inter-segment deductions are included in ‘Total’.
RMB$ million
Packaged meats Fresh pork Others Total (3)
2016 change(%) 2016 change(%) 2016 change(%) 2016 change(%)
Turnover (1) 22,577 (0.27%) 28,029 32.55% 1,239 35.88% 51,845 15.99%
Operating profit 4,783 (1.67%) 437 (10.59%) 220 N/A 5,440 3.62%
Operating margin (2) (%)
21.2 down
30 bps 1.4
down
6 bps 9.9 N/A 10.5
down
130 bps
29
Thank You
Leveraging Competitive Advantages · Growing For The Future